IRS Levies and Wage Garnishments

In all likelihood, nothing is more important to you than the money you earn through work and the money that is in your bank account. That money is not important for what it is, it is important for what it does. It keeps a roof over your head and the heads of your loved ones. It feeds your family. It pays for the car that allows you to retain your job. In other words, that money is your life. Without it, you and those you care about would not be able to survive.

Luckily, most of us don’t have to worry about the security of our money or our ability to earn a living. However, if you owe money to the IRS, there is a very real possibility that they could seize your assets and garnish your wages in order to satisfy that tax debt.

The mechanism that the IRS uses to accomplish this task is called a levy. In this article, we’re going to look at the levy process and what you can do to avoid losing your hard earned assets to the government. Specifically, we’ll look at five areas that can tell you whether the IRS is ready to impose a levy and what you can do about it if they do.

1. Under Internal Revenue Code Section 6330, the IRS must inform you in writing of their intent to levy before they begin proceedings to seize your assets. In addition, they must also inform you of your right to appeal their decision to levy. Therefore, before any levy can take place, the IRS will send you a document called a “Final Notice of Intent to Levy and Notice of Rights to an Appeals Hearing.” This letter can be formally identified by looking for “LT11” in the upper left hand corner.

Once the IRS has sent the Final Notice of Intent to Levy, they must wait 30 days before moving forward with the levy. During this time period, you can appeal the decision to levy by asking the IRS Office of Appeals to review your case. However, if you do not file an appeal and the 30 days has passed, the IRS can now levy your assets – your bank account and your wages – anytime they choose.

If you are unsure whether the IRS has sent you a “Final Notice of Intent to Levy,” the safest course is to obtain a transcript of your records from the IRS. This transcript will definitely tell you whether the Notice has been sent, thereby letting you know how real the risk of being levied actually is.

2. At its heart, the IRS is, in some sense, simply a debt collector for the federal government. Like any debt collector, the IRS likes to know that its outstanding accounts are being serviced. Therefore, the IRS will often give delinquent taxpayers a deadline to get something accomplished, like filing an unfiled tax return or providing the IRS with a financial statement. In any event, if a deadline passes without compliance from the taxpayer, the IRS tends to turn up the heat in order to obtain compliance. In short, if you’ve missed or ignored an IRS imposed deadline, you’ve increased the chances that they will levy your wages and bank account in order to get your attention. You can turn down the heat and avoid the levy simply by communicating with them and providing the information or taking some action that they require.

3. In some cases, a taxpayer may be contacted directly by an IRS Revenue Officer. The only job a Revenue Officer has is to enforce collection of tax debts. They are a little bit like the Marines. They are sent in to get tough jobs accomplished under difficult circumstances. Usually, the Officer lives in the district where they work. This makes them local. They know the communities, they know the people, and they may even know the taxpayer that they are investigating.

If a Revenue Officer has been assigned to your case, it is a sign that the IRS has taken a particular interest in your tax situation. This means you should pay particular attention to their requests. If they ask you to contact them, do so. If they request certain documents, do your best to provide them. Ignoring a Revenue Officer’s requests or instructions is perhaps the easiest way to get your wages garnished and bank accounts levied.

4. If you continue to pile this year’s tax debt on top of previous unsatisfied tax debts, you’re not only compounding your tax problems, you’re also drawing the attention and ire of the IRS. The IRS calls this type of behavior “pyramiding” and as a collection agency, they are not going to tolerate a growing pile of unserviced debt that is a liability to Uncle Sam. Their job is to collect tax revenue and a taxpayer who has pyramiding debt with the IRS can expect to have his or her assets seized in an attempt to get both the taxpayer’s attention and compliance.

If you have multiple years of unpaid tax debt, the easiest way to avoid a lien on your assets is to get in compliance to the best of your ability. When the IRS sees you making an effort to extricate yourself from your tax problems, they are much more willing to be lenient and flexible with repayment options.

5. To the IRS there is no difference between filing your taxes but not paying your tax debt, and not filing your taxes at all. Again, your behavior is seen as an impediment to collecting tax revenue. If you have multiple years of unfiled taxes, the IRS will not relent until you file your returns and become compliant with your tax obligations. This means that in order to obtain your compliance, they will garnish your wages and levy your bank accounts.

In the end, any factor that puts you at risk for levy and wage garnishment can be successfully negotiated and released simply by contacting the IRS and showing them that you are willing to deal with the problem. After all, both you (the taxpayer) and the IRS want the same thing – to close the file and put the matter into the past.

We consult on a broad range of California state and local tax issues, including franchise tax, income tax, property tax, sales and use tax, payroll tax, fuel tax, and business license tax matters, as well as California New Employee Credits and California Competes Credits.